What will Move Mortgage Rates in the week Ahead

Mortgage rates have come under pressure this morning as a worldwide stock market rally has pressured treasury yields higher forcing mortgage backed security prices lower. As MBS prices move lower, lenders are forced to increase consumer borrowing costs. The cause of the global rally was China indicating they will soon end a two year currency peg which was adopted to protect their exporters during the global financial crisis. This is a sign of confidence with the current global economic recovery that is underway.

We have no economic data on the calendar today but the week ahead is full of potentially high impacting reports.

Tuesday
- Existing Home Sales, Many economists believe housing must fully stabilize and begin to improve before the overall economy can really gain recovery momentum. This makes tracking home sales data of much more importance today than in past years. (potentially high impact)
- FOMC Meeting begins. The Federal Open Market Committee meets 8 times a year to set our nation’s monetary policy. If economic growth is weak, the FOMC can lower interest rates (or keep them low) to give the economy a jumpstart. However, in times of aggressive economic growth the FOMC may raise short-term borrowing costs to slow economic activity and prevent inflation.
- Treasury auctions $40billion of 2 year notes. This is $2billion less than last auction of same term notes.(low impact)

Wednesday
- Weekly Mortgage Applications Index (low to medium impact)
- New Home Sales, with the end of the Home Buyer Tax credit, market participants will pay extra attention to this report to get a sense of future economic activity without government support.(potentially high impact)
- Treasury auctions $38billion of 5 year notes. This new supply is $2billion less than last auction of similar notes. Since the life of a mortgage is much closer to 5 years than 2 years, this auction will have more potential impact on rates.(medium to high impact)
- FOMC Meeting Ends. Monetary Policy Statement released at 2:15pm (potentially high impact). If the statement gives any hint of inflationary concerns, mortgage rates will be pressured higher.

Thursday
- Durable Goods Orders. This data tell us how many new orders were placed for the immediate and future delivery of factory produced goods that are intended to last longer than three years. Basically this report tells us how busy factories will be in the months ahead. A busy factory means there is demand for durable goods, which implies the engines of American economic growth are running.(high impact)
- Weekly Jobless Claims, recent reports have shown jobless claims to continue to hold at stubbornly high levels indicating that companies continue to be hesitant to hire new staff as economic conditions remain uncertain. (medium impact)
- Treasury auctions $30billion of 7 year notes. This new supply is $1billion less than last auction of similar notes.(medium to high impact)

Friday
- Gross Domestic Product(GDP) This is the second and final revision to the first estimate of U.S. Economic Output. The "advance" print was +3.2% which was revised lower on the Preliminary to +3.0%. (Medium impact)
- Consumer Sentiment(medium impact)

Reports from fellow mortgage professionals indicate lender rate sheets to be worse than Friday. The par 30 year conventional rate mortgage remains in the 4.50% to 4.75% range for well qualified consumers. To secure a par interest rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you have lower FICO scores or a higher loan to value, you should consider a FHA loan which offers similar rates but higher costs.

I continue to see no benefit with floating. The par rate has held steady for quite some time and lenders are not willing to push rates lower. In my opinion, we need a tape bomb of bad economic news such as the Greece debt crisis for lenders to offer lower par rates. If you are within 30 days of closing, I recommend you lock at current rates.